Does Dow Jones At Year High Benefit Destination Clubs?

By: Destination Club News
Date: October 15, 2009

For the first time in over a year, the Dow Jones moved above 10,000 mark yesterday, a near 3,500 point increase from the year's low. Over the past year, many destination clubs have been forced to cease operations, with virtually all seeing virtually no material new membership sales amidst the market downturn. With the Dow crossing the 10,000 threshold, does the recent success of the markets mean anything to the destination clubs still in operation?

To begin Q4 of 2008, the Dow Jones was at 11,500. By year end, after a series of sharp up and down swings, the markets closed at 8,149. During that same time, the destination club market saw a similar crash. The LUSSO Collection filed for Chapter 11 bankruptcy, a filing that would soon thereafter transition to Chapter 7 in February. High Country Club was reaching out to members for a drastic restructuring of their struggling club, only to file for Chapter 7 bankruptcy in January. One Key World was just a month shy of ceasing operations. Solstice Collection was well on their way to a voluntarily petition for Chapter 11 bankruptcy that would take place in March.

Like the Dow, interest in luxury travel continued to decline through much of 2008 and 2009. As Christian Kirschner laid out his plans to restructure High Country Club in late October of 2008, he stated, "Membership sales have declined since the beginning of 2008 because of consumer fears, and with the economic events of the past 60 days, new sales have become next to impossible." To make matter worse, five-star hotels, villa rentals, and other luxury travel alternatives were available for a song due to overwhelming supply and shrinking demand. While some faltered, nearly all destination clubs modified their cost structures to bring revenue in line with expenditures even in slow sales periods.

Now with the Dow above 10,000 for the first time in 2009, many are talking of recovery on a global scale. China's Shanghai Composite Index has seen a 74% increase since November of 2008. Brazil's Bovespa Index is up 122% over the same period. Germany, Japan, and India all are enjoying similar gains.

On an individual basis, many are also looking more optimistic than a short year ago. According to an Employee Benefit Research Institute report, workers using 401k accounts with 10 or more years job tenure and over the age of 35 suffered losses of 20% or more from January 2008 to January of 2009. By August, those losses were reduced to approximately 15%. Last month, the losses were estimated to be under 10%. If recovery continues, this group of individuals approaching retirement may once again look into the destination club concept for their travel needs.

While 10,000 isn't a magic number, it does sound good and is a banner achievement for a market that appeared on the brink of collapse in March. Don't expect potential members to knock down the doors looking to join any time soon, but there are several bright spots that have emerged over the last several months.

Ultimate Escapes has continued to be the most active in the always fluid destination club arena, reactivating 300 club members, finalizing the acquisition of Private Escapes, signing an exciting agreement with Secure America Acquisition Corporation, and today's announcement that Ultimate Escapes and Everlands would partner to provide Everlands members preferred membership terms following their club's collapse. Abercrombie & Kent Residence Club has introduced their new trial membership plan to entice potential members while Exclusive Resorts has massaged their cost structure to assure themselves that they will remain a market power for years to come. Due in part to the strengthening economy overseas, LUXLife has introduced themselves as "a true private destination club in Asia."

Like the job market, destination clubs will not see instant gains based on the success of the stock market, but pieces are starting to fall into place for the industry to thrive once again.

If you are just beginning your destination club evaluation, request a free copy of our Destination Club Guide, where you will learn important information about the industry, its major players, and suggested due diligence questions to assist you in making the most informed decision possible regarding club membership.